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Pace of '99 Retail Sales Fastest in 15 Years

Retail sales in 1999 surged at the fastest pace since 1984 and producer prices outside of food and energy rose at less than half the rate in the previous year, government figures showed today.

Retail sales in December rose 1.2 percent, led by purchases of clothing, cars and computers, topping November's 1.1 percent gain, the Commerce Department said. The 8.9 percent rise for the year was the largest since a 10 percent gain 15 years earlier.

That strength has not fueled inflation, separate Labor Department figures showed. While the Producer Price Index rose 0.3 percent last month, the core rate, which excludes food and energy costs, rose just 0.1 percent. And the core rate's yearly increase of 0.9 percent was down from the 2.5 percent rise in 1998.

''There's no evidence inflation is beginning to heat up,'' said David Orr, chief economist at the First Union Corporation in Charlotte, N.C. That suggests Federal Reserve policy makers will not raise interest rates by more than a quarter of a percentage point when they next meet in early February, he said. ''The real economy does need to slow down, but they've got time.''

In another report today, the Labor Department said first-time claims for state unemployment benefits were unchanged at a seasonally adjusted 309,000 last week. The four-week moving average for jobless claims rose to 294,000 from 283,000, suggesting jobs remain plentiful.

Concerns about Year 2000 computer problems probably gave an extra lift to retail sales last month, analysts said. A 2 percent rise in food store sales, for example, was the largest monthly increase since May 1991.

Drugstore sales also rose 1.7 percent, and service-station sales increased 2.5 percent, ''well above historical trend,'' said Joel Kent, an economist at Lehman Brothers in New York. ''This makes sense if you think people stocked up on food, refilled drug prescriptions and topped off their gas tanks.''

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The retail sales report also does not take into account the growing effect of business over the Internet, so ''sales are probably understated somewhat,'' said Marilyn Schaja, an economist at Donaldson, Lufkin & Jenrette in New York. ''Brick and mortar companies would report their total sales, but an eToys, say, wouldn't be captured.''

Private estimates for holiday season Internet sales vary widely. Forrester Research estimated last week that Internet retail sales in November and December could reach $5 billion. A study by the Boston Consulting Group and Shop.org, a trade group in Silver Spring, Md., estimated that online holiday sales more than tripled, to about $10 billion in 1999 compared with results in 1998.

The best holiday shopping season in seven years meant that consumer spending, which accounts for two-thirds of the economy's total output, probably accelerated in last year's fourth quarter, according to Ray Stone, an economist at Stone & McCarthy Associates in Princeton, N.J. He estimates consumption rose at an annual rate of as much as 5.5 percent in October, November and December, up from a 4.9 percent pace in the preceding quarter.

For all of 1999, the Producer Price Index rose 3 percent after showing no change in 1998 and falling 1.2 percent in 1997, the Labor Department said. Last year's increase was the largest gain since 1990, when Iraq's invasion of Kuwait caused oil prices to soar. Crude oil prices as measured by the index rose 176 percent last year.

The government will release its report on consumer prices in December on Friday. The Consumer Price Index probably rose 0.3 percent, after increasing 0.1 percent the month before, and the core rate probably gained 0.2 percent, the same as in November, according to analysts.